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Democratic Senators Rail About Debt Load of For-Profit Students

In a hearing on Capitol Hill today, witnesses speaking before the U.S. Senate Health, Education, Labor and Pensions Committee highlighted the debt that many students who attend for-profit colleges rack up and accused the the schools of preying on vulnerable populations who don't always realize the long-term impact of their borrowing.

In the fifth hearing in the past year that has focused on the proprietary higher education sector, U.S. Senator Tom Harkin, D-Iowa, called the "gainful employment" rules issued last week by the U.S. Department of Education "modest" and a step back from the department's original proposal. The rule is intended to track the success of students in getting jobs and repaying loans from career programs, and to take federal funding away from those schools that don't measure up to the department's standards. More aggressive action may be needed in the form of legislation that would have a more lasting impact, said Harkin.

A handful of Democratic senators participated in the hearing, "Drowning in Debt: Financial Outcomes for Students at For-Profit Colleges," No Republicans attended.

"It's better than nothing," Harkin said to Under Secretary of Education Martha Kanter, who testified at the hearing about the new regulations. "What does it say to you, Madame Secretary, that after the rules were published last week, stock prices of these larger, for-profit schools soared?"

Kanter responded that with 11 percent of higher education students at for-profit schools, the department wants the sector to succeed. "We've got to create a model that will help them improve and target the worst-performing programs and have them improve or eliminate their eligibility," she said.

Kanter was a last-minute substitute for Education Secretary Arne Duncan, who she said was recovering from a back injury.

Harkin, who has been critical of the profits that the sector has made with federal Pell Grant and student loan dollars, said not having the regulations go into effect until 2015 lets the colleges avoid scrutiny for too long. "What it said to me was that investors and Wall Street looked at this and said for next three to four years at least, things are going to be pretty good."

The department did its best to create an overall package of 14 rules involving career programs, of which gainful employment was one part, said Kante. "It's not the be-all and end-all," she said.

Kanter added that the rule will do nothing to hurt educational opportunities for low-income students and students of color. "Just the opposite is true. In the years ahead, the disadvantaged students that are disproportionally likely to enroll in these programs will see higher graduation rates, lower default rates, and programs provide that provide better value in the labor market," she said. "They will also be able to make more informed choices."

In an effort to help schools rise to the new standards, Kanter said the department will release guidance providing a blueprint for institutions that want to offer a free trial period for new students, similar to an approach recently instituted by Kaplan University. It will also invite applications for a pilot project giving schools new tools to reduce student debt.

There were no representative for the for-profit higher education sector at the hearing. "It's unfortunate that Senator Harkin continues to hold one-sided hearings and not a fair representation of both sides," said Penny Lee, managing director of the Coalition for Educational Success, which represents career colleges in 41 states. "These are not balanced hearings. These are often hearings about anecdotes." However, Lee was encouraged that Kanter underscored the value of career colleges to millions of students.

The Coalition remains opposed to the gainful employment regulation. A statement by the group released Tuesday afternoon says, "We agree that graduation rates across all of higher education need to be improved. An important first step would be the development of regulations that hold all institutions, regardless of tax status, to the same high standards."

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